Blue Shield of California says it's capping profits at 2 percent

The Sacramento BeeJune 8, 2011 

In what it called a "bold move" to cut health care costs, Blue Shield of California said Tuesday it will cap profits at 2 percent of revenue and pump any extra cash back into credits for customers, funding to care providers and grant awards to nonprofits that provide health care to poor Californians.

"This doesn't solve the affordability problem, but it does represent a paradigm shift for a health plan," said Blue Shield Chief Executive Officer Bruce Bodaken, in prepared remarks ahead of a speech on the plan in San Francisco on Tuesday.

But Blue Shield's news was met with little more than a shrug from the state's insurance commissioner and deep skepticism from consumer advocates, who blasted the announcement as a publicity stunt ahead of a state Senate vote on whether to impose rate regulation on health insurers.

The controversial Assembly Bill 52, penned by Assemblyman Mike Feuer, D-Los Angeles, and lobbied for heavily by Insurance Commissioner Dave Jones, passed in the Assembly on Friday.

"They're spending this money as a lobbying campaign rather than an honest change in business practices," said Doug Heller, executive director of Consumer Watchdog and a vocal critic of Blue Shield. "They are desperate to avoid regulating accountability."

Blue Shield will start by giving back $180 million – the amount by which officials said the insurer exceeded its 2 percent target for 2010. Individual and business customers will get $167 million of that in the form of credits against their premiums – as much as 30 percent in some cases.

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